Small firms fear for livelihoods as OFT opens up pharmacy market

The Office of Fair Trading announced a radical shake-up of the prescription pharmacy market yesterday in a move it said would lead to increased competition, lower prices and more convenient opening hours. But the move was immediately criticised by smaller, independent operators who said their livelihoods would be put in jeopardy.

John D'Arcy, the chief executive of the National Pharmaceutical Association, said: "The only winners from [this] decision will be the shareholders of the large, better resourced players, whose main concern is profit rather than patients. We are scared on behalf of the little guy."

Mike Williams, the owner of the Olton Pharmacy in the West Midlands, said: "This is potentially devastating news for local pharmacies. It is the small, local neighbourhood pharmacies like mine that are most likely to fall victim to deregulation."

The NPA said it feared a return to "leapfrogging" where pharmacies move ever closer to doctor's surgeries to gain the lion's share of prescription work while leaving other areas under-served. But the OFT said the Essential Small Pharmacies Scheme (ESPS) would provide support for firms operating in problem areas.

Nathan Cockrell, a retail analyst at Credit Suisse First Boston said: "I'm surprised they've gone for complete deregulation. They are are assuming that the ESPS would protect the smaller players." He said the squeeze from the major supermarkets would be "quite serious" and was likely to push up the costs of retaining pharmacists.

Up to now anyone wanting to offer a dispensing service had to apply to their local health authority. But the process was slow and usually resulted in being turned down if there was already a pharmacy operating in the area. The OFT is proposing that all pharmacies with qualified staff should be able to dispense NHS prescriptions.

John Vickers, director general of the Office of Fair Trading, said: "The market will be better served in an environment where it can grow freely." The OFT said the current systems resulted in consumers paying £30m a year too much.

The big supermarket groups are likely to be major beneficiaries of the changes. The OFT anticipates that only 400 to 500 new pharmacists will be opened by the major grocers, but the eventual figure is likely to be higher. Asda wants to open pharmacies in all its 260 stores. It also said it would introduce family friendly staff policies to encourage more pharmacists back to work.

Some analysts said that as there is already a shortage of pharmacists in the UK, the market may not grow as readily as the OFT suggests.

Defending its decision the OFT said independent pharmacists only open for an average of 50 hours a week compared to 80 hours a week at supermarket branches. It added that in rural areas GPs are already allowed to dispense drugs. The OFT also said that pharmacists should not automatically lose valuable revenue as 85 per cent of NHS prescriptions are dispensed free.

Boots, which operates 1,330 out of the UK's 12,250 pharmacies, is seen as a potential loser as a result of the changes. But the group denied this, saying it would open pharmacies in more of its stores.